# United States **Court of Appeals**  **for the Federal Circuit**

______________________ WESTERNGECO L.L.C.,

Plaintiff- Cross

- Appellant

v.

ION GEOPHYSICAL CORP ORATION, Defendant

- Appellant

______________________
2013

- 1527, 2014

- 1121, 2014

- 1526, 2014

- 1528

______________________ Appeals from the United States District Court for the Southern District of Texas in No. 4:09

- cv

- 01827, Judge Keith P. Ellison.

______________________
Decided: Janua ry 11, 2019

______________________
J OHN C. O'Q UINN , Kirkland & Ellis LLP, Washington, DC, argued for plaintiff

- cross

- appellant. Also represented by G REGG F. L O C ASCIO , W ILLIAM H. B URGESS ; T IMOTHY G ILMAN , L ESLIE M. S CHMIDT , New York, NY; L EE L ANDA K

APLAN , Smyser, Kaplan & Veselka, LLP, Houston, TX.

D AVID I. B ERL , Williams & Connolly LLP, Washington, DC, argued for defendant

- appellant. Also represented by K

ANNON K. S HANMUGAM , M ASHA H ANSFORD , A NDREW C HARLES M C B RIDE , J AMES M ATTHEW R ICE ; F RANK P ORCE LLI , K EVIN S U , Fish & Richardson, PC, Boston, MA; J ACKOB B EN -E ZRA , B AILEY K ATHLEEN H ARRIS , D ANIELLE J.WESTERNGECO L

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H EALEY , B RIAN G REGORY S TRAND , Houston, TX; F RANCIS J. A LBERT , O LGA I. M AY , San Diego, CA; J USTIN B ARNES , Troutman Sanders LLP, San Diego, CA.

______________________
Before D YK , W ALLACH , and H UGHES , Circuit Judges.

D YK , Circuit Judge

. This case retur ns to us from the Supreme Court

. WesternGeco LLC v. ION Geophysical Corp. , 138 S. Ct. 2129 (2018) (“ WesternGeco III ”). The sole claim remanded to us by the Supreme Court is the lost profits award. T he Supreme Court held “that WesternGeco’s damages award for lost profits was a permissible domestic application of [35 U.S.C.] § 284,” id. at 2139, reversing our decision in WesternGeco LLC v. ION Geophysical Corp. , 791 F.3d 1340, 1349

– 52 (Fed. Cir. 2015) , (“ WesternGeco I ”)

. 1 But the Supreme Court did not decide other challenges to the lost profits award

. In light of the Supreme Court’s dec ision and the intervening invalidatio n of four of the five asserted pa tent claims that could support the lost profits award, we remand to the district court

. B ACKGROUND
This case involves a patent infringement suit brought by WesternG eco L.L.C. (“WesternGeco”) against ION Geophysical Corp. (“ION”) for infringe ment of claims 18, 19, and 23 of U.S. Patent No. 7,293,520, claim 15 of U.S. Patent No. 7,162,967, and claim 15 of U.S. Patent No.

1 Our decision in WesternGeco I was vacated on other grounds by WesternGeco LLC v. ION Geophysical Corp.
, 136 S. Ct. 2486 (2016), but was reinstated in rel evant part on remand by WesternGeco LLC v. ION Ge ophysical Corp.
, 837 F.3d 1358 (Fed. Cir. 2016) (“ West ernGeco II ”).WESTERNGECO L

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7,080,607 (“Bittleston patents”)
, as well as claim 14 of U.S. Patent No. 6,691,038 (“Z ajac patent”)

. The patented technol ogy in this case relates to marine seismic surveys for discovering oil and gas de posits b eneath the ocean floor. The patent claims are directed to technology for controlling the movement and positioning of long streamers towed by a ship. Sensors are located along the length of the se streamers, and they detect returning sound waves that are bounced off of the ocean floor by an airgun. The collected data is then used to create a map of the ocean’s subsurface geology

. Contro lling the positioning of the various streamers in the array is important to the quality of the maps generat ed , which
, in turn, is important to identifying drilling locations for oil or gas

. Both WesternGeco and ION domestically manufa cture devices, the Q

- Ma rine and DigiFin respectively, for steering strea mers in marine seismic surveys. Wester nGeco does not sell its device, instead using it to perform surveys abroad for oil companies

. ION does not perform surveys, instead supplying its device to customers who perform the surveys abroad

. This case does not involve any question as to lost profits from domestic surveys.
In 2009
, West ernGeco sued ION for pa tent infring ement based on ION ’s sales of its DigiFin devices to Wes ternGeco ’s competitors in the marine seis mic survey market

. After a jury trial, t he asserted patent claims were found to be not invalid
, and ION was found to have i nfringed all of the asserted patent claims under 35 U.S.C. §§ 271(f)(1) and (2) . The jury awarded WesternGeco a reasonable royal ty of $ 12.5 million and lost profits of $ 93.4 million
, but declined to award WesternGeco e nhanced damages for willful infringement . The lost profits award was based on 10 surveys, which , according to WesternGeco
, it would have won “but

- for” ION’s sale s of its DigiFin device to WesternGeco ’s competitors. Wes t-WESTERNGECO L

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ernGeco argues that without the patented technology embodied in the device , ION’s customers would not have been able to win the bids for the 10 surveys at issue

. In WesternGeco I we reversed the lost profits award as being based on an unauthorized extraterritorial appli c ation of the patent laws

. Judge Wallach dissented on this point. 791 F.3d at 1349

– 52, 1354

– 64. We unanimously affirmed the district court’s refusal to award enhance d damages for willful infringement

. WesternGeco I , 791 F.3d at 1353

– 54. Wester nGeco petitioned for certiorari
, which the Supreme Court granted, vacated our original decision in WesternGeco I , and remanded for further proceedings consistent with its decisio n in Halo Elecs

. , Inc. v. Pulse Elecs

. , Inc. , 136 S. Ct. 1923 , 1935

– 36 (2016)

. We reinsta ted our earlier opin ion, including reversal of the lost pro fits award, but we vacated the district court’s denial of enhanced damages and remanded for further consider ation in light of Halo

. WesternGeco II , 837 F.3d at 1361

– 64. On remand, WesternGeco sought $ 43.6 million in e nhanced damages, and the district court awarded Wes ternGeco $ 5 million in enhanced damages. The parties then entered into a stipulated “Final Jud gment pursuant to Fed. R. Civ. P. 58.” The stipulation noted that the parties had agreed to the reasonable royalty amount and that ION had paid the full amount on November 25, 2016. Both parties agreed not to appeal the enhanced damag es award and provided a schedule for payment of the e nhanced damages award

. The only item exemp t from the stipulation was the lost profits award, which Wester nGeco had petitioned for certiorari, requesting review of our decision on the lost profits award. Neither party appealed the stipulated final judgment. The peti tion was granted with respect to the lost pro fits award , and i n WesternGeco III , the Supreme Court reversed our decision on lost profits, holding that “Wes ternGeco’s damages award for lost profits [under 35 U.S.C.WESTERNGECO L

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§ 271(f)(2)] was a permi ssible domestic application of § 284,” 138 S. Ct. at 2139, “as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents , ” id . at 2138. The Supreme Court also noted that “[i]n reaching this holding, we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.” Id. at 2139 n.3. The Court then remanded the case to us “for further proceedings consistent with this opinion.” Id. at 213 9.
In December 2015 , the United States Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”) held four of the six asserted patent claims

— ’520 patent claims 18 and 19, ’967 patent claim 15, and ’607 patent claim 15

— unpatentable. See WesternGe co LLC v. ION Geophysical Corp.
, 889 F.3d 1308, 1331 (Fed. Cir. 2018) (“ WesternGeco IPR ” )

. While the case was pending in the Supreme Court, w e affirmed the PTAB’s unpatent ability determination of these four claims

. Id. Thus, the only asserted claims that remain are ’520 patent claim 23 and ’038 patent claim 14, and it is uncontested that only ’520 patent claim 23 may now support the lost profits award.

D ISCUSSION On remand from the Supreme Court, two issues r emain for us to resolve : (1) the impact of the i ntervening invalidation of four of the six asserted patent claims on the fully paid reasonable royalty award
, and (2) the impact of the invalidation of the four claims on the lost profits award and ION’s argument (presented in its original appeal) that “ Pa nduit cannot be satisfied because ION and [ WesternGeco ] do not compete in the marke tplace.” ION Open. Br. 56. I. Reasonable Royalty Award
ION challenges the fully paid and satisfied reasonable royalty award based on subsequent invalidation of aWESTERNGECO L

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number of WesternGeco’s asserted patent claims

. See WesternGeco IPR , 889 F.3d at 1331. ION argues that the calculation of the reasonable royalty under Georgia

Pacific Corp. v. U.S. Plywood Corp.
, 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), would be affected by the inva lid ation of four of the six asserted patent claims , and ther efore a new trial is required

. For support
, ION frames the decision in Fresenius USA, Inc. v. Baxter Int ernationa l, Inc. , 721 F.3d 1330 (Fed. Cir. 2013) as holding that a judgment cannot be final for purposes of intervening patent invalidations if any part of the litigation remains pend ing, and that here the lost profits award continues to be litigated and is not final. We disagree. Fresenius only applies where a judgment is not final. Id. at 1340

– 41 & n.9; s ee also Fresenius USA, Inc. v. Baxter Int’l, Inc. , 733 F.3d 1369, 1371 (Fed. Cir. 2013) (Dyk, J., concurring in denial of rehearing en banc). To be sure, finality under Fresenius requires that “the litigation must be entirely concluded so t hat [the] cause of action [against the infringer] was merged into a final judgment .

. . one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” 721 F.3d at 1341 (alterations in original) (quoting Menden hall v. Barber

– Greene Co. , 26 F.3d 1573, 1580 (Fed. Cir. 1994) ; see ePlus, Inc. v. Lawson Software, Inc. , 789 F.3d 1349, 1358 (Fed. Cir. 2015)

. But Fresenius made clear that it does not allow reopening of a satisfied and unappealable final judgment. 721 F.3d at 1340 (“As the Supreme Court ’s decision in Moffitt made clear
, ‘ [i]t is a mistake to suppose .

. . that .

. . moneys recovered on judg ments in suits .

. . might be recovered back [after a patent is cancelled]. The title to these moneys does not depend upon the patent, but upon .

. . the judgment of the court. ’” (alterations in original) (quoting Moffitt v. Garr
, 66 U.S. 273, 283 (1861)); see Pennsylvania v. Wheeling & Belmont Bridge Co. , 59 U.S. 421, 431 (1855)

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The particular facts of this case establish that the reasonable royalty award constitutes a fully satisfied and unappealable final judgment such that the subsequent invalidation of asserted patent claims does not support reopening

. Here, ION and WesternGeco entered into a compromise agreement resolving all of the issues in the case except for the lost profits award. They stipulated to a “Final Judgment pursuant to Fed. R. Civ. P. 58
, ” and ION further manifested assent to the finality of the judgment as to t he reasonable royalty award by not appealing the judgment and completing its payments under the agre ement

. The parties ’ agreement was reflected in a joint motion filed in June 2017 that resolved all of the issues except for lost profits, although the IPR d ecisions holding that four of the six asserted patent claims were unpaten table had issued in December 2015. In these unique ci rcumstances, it is clear th at the reasonable royalty and enhanced damages awards were agreed to by the parties and subje ct to an unappealable final judgment, which was satisfied and paid in full by ION to WesternGeco

. ION cannot now reopen the agreed and fully paid unappealable final judgment on the reasonable royalty based on the subsequent invalidation of a subset of asse rted patent claims.
II. Lost Profits ION argues that, despite the Supreme Court’s dec ision in WesternGeco III , we should either hold that lost profits are not recoverable in this case or remand for a new trial. First, ION contends that the district court e rred when it denied ION’s renewed motion for judgment as a matter of law (“JMOL”) on the theory that WesternGeco is not entitled to lost prof its based on a Panduit theory of but

for causation because ION and WesternGeco are not “direct competitors.” ION sells only devices and Wester nGeco sells only surveys . A ccording to ION, because Wes t-WESTERNGECO L

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ernGeco and ION do not compete in the same market
, lost profits in the surveys are not recov erable

. For legal su pport, ION relies on a statement from Rite

- Hite Corp. v. Ke lley Co. , 56 F.3d 1538 (Fed. Cir. 1995) (en banc) that “the patentee must show a reasonable probability that, ‘but for’ the infringement, it would have made the sales that were made by the infringer .” Id. at 1545 (emphasis added). ION argues that the empha sized language esta blished a “direct competition” requirement between the patentee and alleged infringer . ION also relies on our decision in BIC Leisure Products, Inc. v. Windsurfing International Inc.
, 1 F.3d 1214 (Fed. Cir. 1993)
, that “[t]he Panduit test .

. . operates under an inherent assumption

. . . that the patent owner and the infringer sell products sufficiently similar to compete against each other in the same market segment.” Id. at 121 7– 20

. We are not convinced. In context, the statement f rom Rite

- Hite was addressing the requirement of “but -for” causation to recover lost profits, not imposing a requir ement of direct competition between the patentee and alleged infringer that was neither at issue in the case nor further discussed in the opin ion

. See 56 F.3d at 1545. BIC clearly focused the inquiry on whether the patent owner’s and the infringer’s products are adequate substitutes for

consumers in a particular market . 1 F.3d at 1219

. Wes ternGeco’s and ION’s devices competed by performing the same types of functions for surveys. And there was sufficient evidence in the record for the jury to conclude that the products did compete

— i.e., that consumers in the surveying market (oil companies) considered Wester nGeco’s Q

- Marine device and ION’s DigiFin device to be substitutes for their surveying needs (i.e., that the pro ducts competed in the same market)

. See, e.g. , J.A. 3 791:1

– 23; 7006 ; 7135

. To be sure
, the fact that ION sells only devices while WesternGeco only sells surveys may be relevant to the computation of lost profits. WesternGeco had two categ o-WESTERNGECO L

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ries of lost profits: the profits attributable to providing the patented device and the profits attribu table to providing other aspects of the surveys (e.g., the ship for towing the streamers). “[A]pportionment is required even for non

royalty forms of damages.” Ericsson, Inc. v. D

- Link Sys., Inc. , 773 F.3d 1201, 1226 (Fed. Cir. 2014). If the applic ation of the Panduit factors does not result in the separ ation of profits attributable to the patented device and the profits attributable to providing other aspects of the
surveys (e.g., the ship for towing the streamers) , it a ppears that apportionment is necessary

. 2
This apportionment argument was not made in the supplemental briefing and was raised for the first time at oral argument. W e conclude that the argument was waived on this appeal . However, if the district court orders a n ew trial on damages, ION may present arg uments concerning apportionment at the new trial. ION’s second argument is that the lost prof its award cannot be sustained due to the intervening invalidation of four of the five asserted Bittleston patent claims

. H ere, the jury found all of the asserted claims to be infringed and made a single lost profits award. But four of the five claims relied on to support lost profits liability have since been eliminated
, and now the only remaining claim that could support the lost profits award is ’520 patent claim 23
, a dependent device claim

. The jury instructions and verdict form did not instruct the jury to award damages based separately on infringement of each of the asserted claims , and the jury did not do so

.

2 See Mentor Graphics Corp. v. EVE

- USA, Inc. , 851 F.3d 1275 , 1287

– 88 (Fed. Cir. 2017) (holding that “sati sfaction of the Panduit factors satisifie[d] principles of apportionment” where, “on the undisputed facts of this record,” it was clear the plaintiff’s damages were “tied to the worth of its patented features”)

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The jury could have rested its award on infringement of a now

- invalidated claim, which cannot be sustained on review. The general rule is that when a “ jury was told it could rely on any of two or more independent legal the ories, one of which was defec tive,” the gen eral verdict must be set aside

. i4i Ltd. P’ship v. Microsoft Corp. , 598 F.3d 831, 849

– 50 (Fed. Cir. 2010) (citing Walther v. Lone Star Gas Co. , 952 F.2d 119, 126 (5th Cir. 1992)), aff’d , 564 U.S. 91 (2011); see Northpoint Tech., Ltd. v. MDS Am., Inc.
, 413 F.3d 1301, 1311

– 12 (Fed. Cir. 2005); United N.Y. & N .J. Sandy Hook Pilots Ass ’ n v. Halecki , 358 U.S. 613
, 619 (1959) (“[A] new trial will be required, for there is no way to know that the invalid [legal theory] was not the sole basis for the verdict.”); Maryland v. Baldwin , 112 U.S. 490 , 493 ( 1884). We have recognized such a rule “[i] n a situation

— such as this one

— where the jury rendered a single verdict on damages, without breaking down the damages attribut able to each patent
, ” and at least one of the p atent claims was held to be defective

. Verizon Servs

. Corp. v. Vonage Holdings Corp. , 503 F.3d 1295, 1310 (Fed. Cir. 2007) (citing Memphis Cmty. Sch. Dist. v. Stachura , 477 U.S. 299, 312 (1986)); see Accentra, Inc. v. Staples, Inc. , 500 F. App’x 922, 931 (Fed. Cir. 2013 ).
But we do not think a new trial is automatically r equired here if the jury must have found the technology covered by ’520 patent claim 23 was essential for perfor ming the surveys. In other words, the award can be su stained if there was undisputed evidence that the technology covered by ’520 patent claim 23 was necessary to perform the surveys. In this area we apply a harmles sness analysis similar to our approach in the case of err oneous jury instructions. See Avid Tech., Inc. v. Harmonic, Inc. , 812 F.3d 1040, 1047 (Fed. Cir. 2016) (“[T]he error in the instruction governing this central dispute at trial would be harmless only if a reasonable jury would have been required by the evidence to find non

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WesternGeco argues that both parties’ damages e xperts informed the jury that infringement of any one of the Bittleston patent claim s would support the full amount of the lost profits award. It cites to ION’s own expert , Mr. Gunderson. He test ified that he “ assumed that

. . . the patents are not found to be invalid and that

— that there is infringement that is occurring on at least one valid claim,” “one of the base assumptions” for damage s experts. Western Geco Open. Supp l . Br. 15 (cit ing Trial Tr. at 4655 : 12

– 4656 :3
, WesternGeco LLC v. ION Geophysical Corp.
, 953 F. Supp. 2d 731 (S.D. Tex. 2013 ), ECF No. 507 ). WesternGeco reads too much into this testimony. Mr. Gunderson was merely identifying the basic assum ption of his patent damages c alculations, and his testimony was directed to showing that WesternGeco was not ent itled to the claimed lost profits for infringement based on
any of the patents. See, e.g. , Trial Tr. at 4658
, 4664
, 4736
, ECF No. 507

. We do not interpret this testimony as supporting the theory that the entirety of the lost profits could be supported by infringement of any one Bittleston patent claim

. WesternGeco also relies on its own expert, Mr. Sims. He testified that Bittleston’s lateral steering technology was required to perform surveys and that “my unde rstanding is that the benefits would be attributable to each of the [Bittleston] patents because each of the patents would prohibit ION from being able to sell and supply and
, therefore, the contractors from being able to use the lateral steering technology.” WesternGeco Open. Supp. Br. 14

– 15 (citing Trial Tr. at 2661 : 13

– 2662 :6
, ECF No. 497 ).
B ut it is clear that Sims was simply making an a ssumption rather than making an indepe ndent determin ation the technology represented in the claims was

nece s sary to perform the surveys

. See, e.g. , Trial Tr. at 2386 :2–7 , ECF No. 474

. Sims was a damages ex pert. He di s claimed knowledge as to the technical aspects, andWESTERNGECO L

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expli c itly relied on others to support his assumption that infringement of any one of the Bittleston patent claims would have been necessary to perform the 10 surveys at issue in the lost profits award

. See, e.g. , Trial Tr. at 2378:24

– 25 (“I confirmed with Mr. Walker, that there was a requirement for lateral steering”)
, 2386 , ECF No. 474; Trial Tr. at 2657

– 58 , ECF No. 4 97

. Sims testified that he relied on Mr. Walker for help in identifying survey s where the patented technology was required, but Mr. Walker disclaimed any kno wledge as to the scope of the patents

. See Trial Tr. at 1760

– 61 , ECF No. 453

. Thus, this test imony cannot support the jury award on lost profits.
WesternGeco has also not cited to any other specific testimony that infringement of ’520 patent claim 23 was necessary to perform the 10 surveys at issue . Instead, at oral argument, WesternGeco argued that the jury was informed generally that the lateral steering technology was required for the surveys at issue and that claim 23

covers part of that technology. But lateral steering tec hnology was also reflected in the four other
, now

- invalid
, asserted claims

— ’520 patent claims 18 and 19
, ’967 patent claim 15, and ’607 patent claim 15 . For example,

now

- invalid ’ 520 patent claim 18 recites: An apparatus comprising: (a) an array of streamers each having a pl ura l ity of streamer positioning devices there along; (b) a control system configured to use a control mode selected from a feather angle mode, a turn control mode, a streamer separation mode, and two or more of these modes. ’520 Claim 18.
And now

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ling comprises the control system attempting to keep each streamer in a straight line offse t from a towing direction by a feather angle. The only surviving claim, ’520 patent claim 23, recites: The apparatus of claim 18 wherein the towing comprises ending one pass, turning a towing ve ssel having the streamers attached thereto while throwing out the streamers before beginning a nother pass, with the control mode in the turn co ntrol mode during the turning and throwing out. To sustain the lost profits award, the record must esta blish that there was no dispute that the technology covered by claim 23 , independent of the technology covered by the

now

- invalid claims (e.g., ’520 patent claim 18 and 19), was required to perform the surveys at issue. This determin ation must be made on the present record

. Because of in adequate briefing on this issue prior to oral argument
, 3 and because the dis trict co urt is in a better position to consider the issue in the first instance
, we remand to the district court to determine whether a new trial on lost profit damages is required

. See Verizon, 503 F.3d at 1310 ; DDR Holdings, LLC v. Hotels.com , L.P.
, 773 F.3d 1245, 1262 (Fed. Cir. 2014)

. The district court
may deny a new trial on lost profits if , but only if, it concludes that WesternGeco established at trial with undisputed evidence that ’520 patent claim 23 co vers technology necessary to perform the surveys upon which the lost prof its award is based.

3 The parties subsequently filed Fed. R. App. P. 28(j) letters addressing where in the record the jury was informed that the technology covered by ’520 patent claim 23 was necessa ry to perform the surveys at issue.WESTERNGECO L

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C ONCLUSION For the foregoing reasons, we reject ION’s challenge to the reasonable royalty award and remand to the di strict court for further proceedings as to the lost profits

. W e also reinstate sections I, II, and IV of our decision in WesternGeco I and sections I and II of our decision in WesternGeco II , which were not affected by either the initial vacatur and remand from the Supreme Court, 136 S. Ct. 2486 (2016), or the Supreme Court’s subsequent decision in WesternGeco III

. AFFIRMED

- IN

- PART, VACATED

- IN

- PART, AND REMANDED
C OSTS
No costs.